Champagne Demand Continues to Slide, Health Claims Could Help

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FILED DECEMBER 1, 2009

Dear Client:

Shipments of champagne to the United States declined -41.2% from January to August, according to the US division of the Champagne Bureau, as Americans increasingly trade down from champagne to cheaper domestic and imported sparkling wines. This is bad news for champagne producers since Americans are the second-largest drinkers of champagne outside France. As a result, prices are being slashed this year to an average $35 a bottle, down from an average of $50 last year. Revenue for many of the best-known labels dropped as much as 50% for non-vintage and up to 85% for the top cuvees, according to Bloomberg.

“We have adjusted our prices accordingly,” said Bertrand de Fleurian, U.S. president for Laurent-Perrier, in a Bloomberg interview. “In fact, our prices are lower than two years ago, even with the strength of the euro.”

CHAMPAGNE HAS HEALTH BENEFITS SIMILAR TO RED WINE

New research published in the British Journal of Nutrition says a little bit of champagne or sparkling wine a day could be good for your heart – similar to red wine. This positive research comes just in the nick of time as champagne experiences continually declining sales, particularly in the US. Polyphenols found in red wine help the heart by slowing down the removal of nitric oxide from the blood, which lowers blood pressure and reduces the risk of heart problems and strokes. Similarly, elevated levels of nitric oxide found in champagne cause blood vessels to dilate, and has the same effect as red wine. The team found that champagne had a greater impact on nitric oxide levels in the blood than did a polyphenol-free alternative of alcohol and carbonated water.

CALISTOGA CELLARS TO COMPLY WITH NEW AVA REGULATIONS

Calistoga Cellars said it will continue to bottle its sauvignon blanc and zinfandel wines under its Calistoga Cellars brand, using at least 85% grapes grown within the new appellation. Recall that the Calistoga sub-AVA was recently approved by the TTB, which declined to grandfather in Calistoga Cellars and Calistoga Estates. The TTB gave the two wineries 3 years to transition to the new rule that requires wineries to source 85% of their grapes from the Calistoga AVA or cease using “Calistoga” on their wine label. Over time Calistoga Cellars will transition its cabernet sauvignon and chardonnay wines to the Louer Family Vineyards brand.

General Partner Roger Louer said, “Although the TTB gave us three years to make this change, we are announcing our transition plan now. We are in touch with our distributors around the country and they are all very supportive of our new brand strategy.”

Roger indicated that the decision by the TTB was a relief, as it ends five years of uncertainty about the future of the Calistoga Cellars brand name. The brand’s future came into question when the Calistoga AVA was proposed. Louer indicated that the winery could now resume its growth initiatives without having to worry about its brand names. The winery sells about ten thousand cases of wine a year in more than thirty states.

AMERICANS HOLDING OUT FOR LAST MINUTE SHOPPING

Some new holiday trends are emerging this year, such as consumers holding out for last-minute deals and sticking closely to lists. A new survey from American Express found that 66% of consumers have yet to finish their holiday shopping but that doesn’t mean they’re necessarily procrastinating. Thirty-one percent are holding out for the best deals, 19% are still saving money, 11% will wait to use their last paycheck, 10% are waiting for post-holiday sales, and 5% of the general population and 12% of young professionals are holding out for an end-of-year bonus.

Affluent and young professionals predict that they’ll spend an average of $750 and $470, respectively, on purchases related to holiday parties such as food and alcohol. This directly benefits wine and spirits. Sixty-eight percent of partygoers expect to buy a hostess gift and spend on average $35. The most popular gifts consumers usually receive from guests is food (43%) and beverages (38%) to serve at the party, which happen to be the top two choices for what people really want when hosting. Research was conducted online November 25 -- December 1, 2009 among a random sample of 2,005 adults aged 18 and older.

FOSTER’S WILL LIKELY PAY LESS FOR CHARDONNAY GRAPES IN 2010

Foster’s has warned Australian grape growers that they will likely receive only about $150 a ton for chardonnay grapes, although the typical cost of production is about $230 to $300 a ton, according to The Age. Final grape prices will be determined before the end of the year. “In this situation of industry oversupply, no one wins - growers or producers,'' a Foster's spokesman said in the article.

''We need to return to a balance. As a major grape grower, we understand the pressures that growers are facing and we know that it is vital that we provide a realistic indication of where the market is currently placed.''

According to the article, Foster's will agree to buy all contracted amounts from Riverland and Mildura growers for the 2010 vintage, the company says, without additional caps or limitations on tonnages. It is expected that grape prices for red varieties will be slightly higher.

According to Adam, "The new structure of Goelet Wine Estates will allow each winery to retain its own distinct identity and control over day-to-day operations while fully benefiting from the extensive expertise and resources of our international team in winemaking, viticulture, distribution management and marketing support."

AUSTRALIAN VINTAGE AND CONSTELLATION BRANDS have reportedly submitted a request for an informal merger of their winery operations with the Australian Competition & Consumer Commission. They have not yet struck a binding agreement and Australian Vintage said ongoing talks still may not lead to a transaction. If a merger does end up taking place, both companies would have equal ownership, according to Australian Vintage.

DIAGEO RECEIVES ENVIRONMENTAL AWARD. Four Diageo Chateau & Estate Wines (DC&E) facilities were recently named winners of California's Waste Reduction Awards Program (WRAP) in recognition of their green initiatives. Beaulieu Vineyard won the WRAP award for the seventeenth time; Sterling Vineyards and the DC&E Wines Carneros Bottling and Distribution Center won for the second time; and DC&E Paicines Operations received its inaugural win.

NIELSEN AND CATALINA STRIKE J-V. The Nielsen Company and Catalina Marketing Corporation have formed Nielsen Catalina Ventures, a 50-50% joint-venture. It will integrate information from Nielsen’s TV, internet and household purchase panels, with purchase data from more than 50 million shoppers from a cross-section of retailers in Catalina Marketing’s network.

BEAM GLOBAL SPIRITS & WINE HAS APPOINTED Mindy Mackenzie, 39, as svp of human resources. For the past five years, Mindy held various positions at Campbell Soup and most recently served as vp, human resources & public affairs for Campbell’s Asia Pacific division. She will report directly to Matt Shattock.

ADLER FELS WINERY has named Daniel O’Leary as its vp and gm. He previously served as Adler Fels’ national director of retail development.

Until tomorrow, Megan

“I never think of the future - it comes soon enough.”Albert Einstein

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